Twenty-six states and Puerto Rico have laws allowing them to enter into an agreement with a private entity to finance an infrastructure project through risk sharing. These partnerships are called public-private partnerships or P3s for short. Michigan, which has had more than its share of economic woes in recent years, may soon be joining the group allowing the partnerships. In May, the state's House of Representatives passed House Bill 4961, which would allow public-private partnerships for public transportation projects.
New York and Pennsylvania are among the other states hoping to get a piece of the public-private partnership action1 Both states have studied the issue in recent years. Their efforts and those of the states that preceded them are an indication that the U.S. infrastructure finance system is broken. It's relied for many years mostly on revenues generated by gas taxes at the state and federal levels. But political considerations have made it difficult to adjust those taxes to account for inflation and the increased efficiency of automobiles that means motorists are buying fewer gallons of gas with the tax attached. Meanwhile, the federal government has yet to come up with a new plan for the future of transportation funding. New legislation to authorize federal transportation programs has been delayed until at least 2011.
That's left states looking for inventive solutions to address their ever-increasing infrastructure needs. Enter the public-private partnership, a funding mechanism that has proved successful in Europe, Australia and elsewhere. Many states hope it can at least be a part of the solution to the transportation finance puzzle.